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2. You have some money to invest in one of two accounts. The first account pays
5% simple interest, and the second pays 4% compound interest. How would
you decide which account to use? Discuss your answer.

Sagot :

GinnyAnsweridn

Final answer:

To decide between simple interest and compound interest investments, calculate the final amounts using the appropriate formulas and compare the results.


Explanation:

To decide between investing in an account with 5% simple interest or 4% compound interest, calculate the final amount from each option after one year. For the simple interest account, the final amount is calculated using the formula Final Amount = Principal x (1 + (Interest Rate x Time)). For the compound interest account, the final amount is calculated using the formula Final Amount = Principal x ((1 + Interest Rate)^Time). Compare the final amounts from both accounts to determine which option yields higher returns.

Learn more about Interest Rates and Investments here:

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